Zomato surges 6% to new 52-week high; brokerages upbeat on Q3 result

Shares of Zomato soared 6 percent in the morning trade on February 12 to hit a new 52-week high of Rs 158.80 on the National Stock Exchange (NSE). The surge pushed the scrip closer to its all-time high of Rs 169, which it hit on November 16, 2021.

The rally comes after the Gurugram-based food aggregator consolidated net profit of Rs 138 crore for Q3FY24, as against a net loss of Rs 347 crore in the year-ago fiscal.

Zomato‘s contribution margin — a key profit metric —  expanded to 7.1 percent in the December quarter after it introduced of a platform fee for food deliveries.

At 1.38 pm, the stock was trading 3 percent higher at Rs 155.20 on the National Stock Exchange. The multibagger stock has rallied more than 200 percent in the past year, outperforming the benchmark Nifty, which has risen 21 percent during the period.

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Its quick commerce business Blinkit’s gross order value (GOV), the total value of all orders placed, more than doubled, while mainstay the food delivery business grew 27 percent, which helped the revenue jump 69 percent YoY to Rs 3,288 crore.

Brokerages remain bullish on Zomato. Bernstein said the company has set medium-term growth expectations of around 50 percent on-year. The growth will be led by Blinkit, which has seen impressive acceleration over the past few quarters.

As a result of its smart gains in the food delivery segment, which was up 27 percent on-year, Jefferies has raised its target price on Zomato to Rs 205, with a “buy” call.

HSBC also raised the target price from Rs 150 to Rs 163. The international brokerage said it now expects a gradual return going forward, compared to the previous twelve months.

The food delivery growth can be driven by improvement in order frequency, restaurant addition and increase in market share. While Zomato’s average order value increased, it was led by seasonal demand, the management said.

Key monitorables for Zomato will be the scale of business beyond metros and potential competitive intensity in the future, Elara Capital said.

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According to Motilal Oswal, the food delivery business is still in a nascent stage in India, with a long runway for growth.

“With a dominant market share and strong growth in the food delivery business and Hyperpure, we expect Zomato to report a strong 38 percent Adjusted revenue CAGR over FY24-26,” the brokerage said as it maintained its “buy” call on the counter with a target price of Rs 170 a share.

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